Shares in Zoom Video Communications Inc. soared Tuesday after the firm reported strong quarterly results and raised its annual revenue forecast due to COVID-19-fuelled work-from – home environment.
The San Jose, California-based Zoom ‘s shares gained as much as 47 percent, for the first time running the market capitalization of the video communications platform above $125 billion. At that level, according to Dow Jones Market Data, Zoom was on track to close with the 55th largest market cap among U.S. firms and was bigger than IBM’s $110 billion valuation.
The strong gains come after Zoom reported on Monday night that profit rose to $185.7 million in the three months through June, or an adjusted 92 cents per share – more than double the 45 cents that analysts surveyed by Refinitiv had expected.
Revenue also outperformed estimates, rising 355 percent to $663.5 million as the number of institutional customers increased to over 370,000 by 458 percent.
“With WFH productivity better than expected and continuing to prevent COVID from returning to work, we agree that the value proposition of ZM is continuing to grow,” Morgan Stanley analyst Meta Marshall wrote.
However, the firm cautioned that the stock is priced for the majority of users to work permanently or attend school from home at Zoom’s current valuation of about 40 times 2021 revenue.
Zoom shares through Monday were up 378 per cent year-to-date.
Zoom ‘s revenue was close to $186 million , up from a mere $5.5 million in the quarter of the year. Zoom increased its adjusted gross margin to 72.3 per cent, partly due to expanding the capacity of its own data centre equipment, from 69.4 per cent one quarter earlier.
During the quarter, people became more dependent on Zoom’s video calling software for business, educational, and personal use, after the coronavirus pandemic led officials to direct people around the world to stay home, meaning that people could no longer meet in person as before. The company hired leaders in information security and diversity, added “H.R.” Lt . Gen. Herbert Raymond. McMaster announced plans for research and development centres in Phoenix and Pittsburgh to its board, and said it acquired secure messaging start-up Keybase.
Zoom averaged 148.4 million active monthly users in the quarter, up 4,700 per cent year-over-year, RBC analysts led by Alex Zukin wrote in a note distributed to customers on Aug. 17, citing data from the SensorTower app analytics startup. The analysts hold on Zoom stock the equivalent of a buy rating.